Australia: The Unfair Contracts Act And Real Property: Should The Seller Beware?

Last Updated: 6 September 2010
Article by Matthew Castley

Sellers of real property under standard form contracts should review their standard form contracts to identify terms which may be at risk under the new Trade Practices Amendment (Australian Consumer Law) Act 2010.

Historically, real property contracts have been governed by the doctrine of caveat emptor, or "let the buyer beware". Sellers should be wary of the potential impact of the new Trade Practices Amendment (Australian Consumer Law) Act 2010 (Unfair Contracts Act) on contracts for the sale of real property.

The Unfair Contracts Act applies to "consumer contracts" which are in a "standard form".

What are consumer contracts?

Consumer contracts are contracts where at least one of the parties is an individual acquiring a product or service (including an interest in land) wholly and predominantly for personal, domestic or household use or consumption. Contracts for the sale of land to individuals for personal use (including occupation and possibly personal investment purposes) are likely to be consumer contracts.

Standard form contracts

The term "standard form" is not defined, however a court must consider:

  • whether one party has all or most of the bargaining power;
  • whether the contract was prepared by a party before any discussion;
  • whether the other party had an effective opportunity to negotiate terms;
  • whether the terms of the contract take into account the specific characteristic of another party or the particular transaction.

The scope for interpretation of the term "standard form" (and hence the application of the Act) is potentially very broad. For example, the Act may apply in circumstances where the affected party had the opportunity to take legal advice and to seek amendment to the terms of the contract. Certainly the Act will potentially apply to usual residential sales (ie. adopting standard form residential conveyancing contracts), "off the plan" sales by developers, sales by receivers and managers, mortgagees in possession, etc.

What are unfair terms?

A term will be unfair if:

  • it would cause a significant imbalance in the parties' rights and obligations arising under the contract;
  • it is not reasonably necessary to protect the legitimate interest of the party advantaged by the term; and
  • it would cause detriment to a party if it were to be relied on.

Importantly, the onus is on the party asserting a term is necessary to protect their legitimate interests to prove this to be the case.

The Act includes examples of terms that may be unfair. These include terms under which:

  • one party may unilaterally avoid or limit performance of the contract, terminate the contract, vary the contract or renew the contract;
  • one party is penalised for a breach or termination;
  • one party may unilaterally vary the up front price without the other party being able to terminate;
  • one party may unilaterally vary the characteristics of the subject matter of the contract (for example, the land or improvements to be constructed on the land);
  • one party may assign the contract to the detriment of the other without consent;
  • one party's right to sue another party is limited.

Terms will not be unfair to the extent that they:

  • define the subject matter of the contract;
  • set the up front price (ie. consideration) provided for under the contract and disclosed at or before formation; or
  • are required or expressly permitted by any law.

Effect of a term being "unfair"

An unfair term will be void and parties may not rely on it. However the contract will continue to bind the parties if it can operate without the unfair term. The reliance on an unfair term is not a contravention of the Act at first instance, however the regulator (eg. the ACCC, ASIC or relevant State department) can seek a declaration that a term is unfair, and if made, continued reliance on that term will contravene the Act.

There are numerous examples of usual contractual terms in existing real property contracts which may, on their face, be unfair having regard to the provisions of the Act. We look at two below.

Example 1: "Off the plan" contracts for sale of land or strata titled units by property developers

An "off the plan" contract for sale to domestic consumers will (in usual circumstances) be caught by the Act. Such contracts customarily include provisions allowing developers to vary the size, dimensions, boundaries or encumbrances affecting a lot, or alter or swap finishes to a unit, where the buyer would not be materially adversely affected by the change (or words to this effect). On face value, these provisions may be unfair as they unilaterally allow the developer to vary the characteristics of the subject matter of the contract.

Presently, developers would need to rely on the argument that such provisions are required to protect their legitimate commercial interests, considering that it is commercially not feasible to guarantee the finished product will not be amended from disclosure plans over the course of a development.

To minimise the risk of such clauses being unfair, developers may need to consider amending them, for example, limit the changes which can be made, or to allow buyers a right to terminate or to receive compensation in circumstances where the property being sold changes.

Example 2: Sale of land by receiver and manager - right to extend completion or terminate where prevented from completing

Contracts for sale of land by receivers and managers usually include the unilateral right for the seller to extend the date for completion or to terminate the contract, where the receivers are unable to complete the contract (eg. as a result of a caveat registered against the title). These clauses may be unfair as they allow the seller a unilateral right to extend or terminate the contract, subject to an argument as to what is necessary to protect the seller's legitimate commercial interests.

Receivers and managers could minimise this risk by making the right to extend or terminate exercisable by both parties.


At present, the extent to which contractual provisions will be read down as a result of the operation of the Act is not clear. While the extent of application of the Act by the courts will become clearer over time, in the interim, sellers of real property under standard form contracts should:

  • consider the potential application of the Act;
  • review their standard form contracts to identify terms which may be at risk;
  • if possible, identify alternative drafting (and evaluate the commercial impact of such drafting) or alternatively confirm the commercial requirement for retention of the term.

In all cases, effective severance clauses should be incorporated into affected contracts, and clauses should be drafted, so far as possible, to allow potentially offensive provisions to be easily severed from the contract.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.